When we immigrated to the U.S., my parents dreamed of capitalism. They didn’t say it that way…to a six-year-old. But they knew the U.S. was nothing like Soviet-era communism. There, your options were only as good as your connections. And always worse than the borscht.
In the U.S., people could dream. Not fantasies, like “I want to be a princess.” (Though I’m often mistaken for Rapunzel.) No, in the U.S., anyone with a great idea and spectacular effort could become Mark Zuckerberg. …or whoever started Dial-A-Mattress.
Even after making it, they could never stop trying to please customers. At any moment, someone could swoop in and win their affection.
In many industries, the very idea of competition is dying. Competition is a temporary, unsteady state in Capitalism. The steady state is monopoly.
As I argue in the latest episode of The McFuture podcast (and here on LinkedIn), we are in the midst of a revolution – to redefine the American dream into something the founding fathers would not recognise. The irony of course, is that the tools of that revolution are increasingly controlled by a handful of monopolies, oligopolies and cartels – all the words you forgot from Economics class.
Let’s talk about those tools. Not just the innovation or “disruption” that spawned them – but who controls them and what that means for us.
That brings me to today’s most beloved tool-builders: startups.
Every morning, Silicon Valley titans and nerd armies wave their iPads in the air and scream, ‘DISRUPTIOOOOON!!!!’
Then slide into their cocoons to rain 1’s and 0’s of doom on some unsuspecting industry.
Except…startups are Trojan horses. We think of them as revolutionaries when in fact, they’re the farm team for the establishment.
Very few make a profit, or become standalone companies, or change the world.
86% are acquired by big companies.
Jet.com was supposed to conquer Amazon.com. It got bought by Walmart.
Dollar Shave club was supposed to rain cheap razors on the masses. They were bought by Unilever.
Vice is supposed to be the biker gang of news. They’re part-owned by Rupert Murdoch, Walt Disney, and A&E.
So the startup revolution is mostly a story they tell themselves.
Our toolmakers mostly make big business bigger. They’re not changing the balance of power. They’re preserving it.
In 1955, The Fortune 500 was 35% of GDP. Today, it’s 72%!
And 100 companies make up almost half of our entire economy. Think about that. HALF.
The president can take all their CEO’s calls in two afternoons.
And they’re using their advantages – cash, protective regulations, scale, brand – to control as many of our fancy new tools as they can.
This concentration is happening in every major industry.
I used a familiar teamwork classification to break these industries into three categories:
- Norming: these industries are either monopolies or “monopoly-adjacent”
- Re-Forming: big industries that are consolidated but have fundamental flaws that make challenges possible, but not necessarily probable.
- Storming: many of these are dinosaurs that may not realise their way of doing business is going extinct.
Here is a sampling. (I discuss the rest on the podcast.)
In 1990, the five largest banks controlled 10% of banking assets. Today, they control 44%.
Sure, there have been lots of startups in finance. Any that matter get bought. One that made it was Paypal. It was supposed to revolutionise finance. This is how many companies PayPal put out of business: 0. Others like robot-investing, mobile payments, and crowdfunding will all be acquired or co-opted. Finance (and consumer trust) work sloo OOO wwwww.